October 2, 2014

U.S. Foreign Policy: 100 Years of Failure

TAMPA, November 19, 2012 — An Iraqi diplomat has called upon other Arab oil producers to “use oil as a weapon” against the United States. Fox News reports this as if it should come as a surprise.

“The shocking statement from a democratic government in power only after the U.S. and allies ousted murderous dictator Saddam Hussein in a costly and bloody war laid bare the Middle Eastern nation’s true allegiance,” reports Fox.

The detachment from reality exhibited by news organizations like Fox and Americans in general is stunning. Americans actually believe that Iraqis should be grateful that the United States invaded their country, destroyed their infrastructure, killed hundreds of thousands of innocent civilians and made homeless refugees of millions more.

They also believe that after deposing a relatively westernized dictator and putting the Shia majority in power, the resulting government would not seek to retaliate against U.S. support for Israel.

This is by no means an isolated incident. It is a recurring theme. Contrary to official myth, U.S. foreign policy has been a failure for the past 100 years, virtually without exception.

We’re constantly told that the United States has a “special role” in the world, due to its status as sole superpower and the role it has played over the past century “defending freedom.” This is pure delusion.

A small percentage of Americans are vaguely aware that Osama bin Laden did not create Al Qaeda (Arabic for “the base”). It was started in Pakistan by Sheik Abdullah Azzam with CIA support. According to veteran reporter Eric Margolis,

“I know this because I interviewed Azzam numerous times at al-Qaida HQ in Peshawar while covering the anti-Soviet jihad in Afghanistan. Azzam set up al-Qaida, which means “the base” in Arabic, to help CIA and Saudi-financed Arab volunteers going to fight in Soviet-occupied Afghanistan. In those days, the west hailed them as “freedom fighters,” writes Margolis.

Continue at Communities@ Washington Times…

What is Your Fair Share?

“For were the impulses of conscience clear, uniform, and irresistibly obeyed, man would need no other lawgiver; but that not being the case, he finds it necessary to surrender up a part of his property to furnish means for the protection of the rest…”

- Thomas Paine, Common Sense (1776)

There were not many surprises in President Obama’s 2012 state of the union address on Tuesday. He touted what he claims are the accomplishments of his administration and pushed his left-leaning economic agenda. For the president, all economic growth has its roots in some sort of government intervention, including “help financing a new plant, equipment, or training for new workers,” giving “community colleges the resources they need to become community career centers,” or trying to “spur energy innovation with new incentives.” Of course, further expanding a government that already spends about 50% more than it collects in taxes can only be accomplished one way – by collecting a lot more taxes.

To this end, the president resorted to the perennial liberal/progressive mantra that everyone “pay their fair share.” Obama used this term three times during the speech in regard to taxes. As even many of the Republican presidential candidates seem to buy into it, the president was also unable to resist the urge to promote the latest left-wing myth that millionaires like Mitt Romney pay less in taxes than their secretaries. This is complete nonsense, of course, but it is effective in eliciting the appropriate outrage from people who don’t stop to do either some simple math or even a little critical thinking.

For the president, there doesn’t seem to be a ceiling on what anyone’s fair share might be. However, he does have a clearly defined floor. “If you make more than $1 million a year, you should not pay less than 30 percent in taxes.” Exactly why that number is “fair” or even the millionaire’s “share” is somewhat difficult to determine. Neither does Obama answer the question that should logically follow. If you make under $1 million per year, what is your fair share in taxes?

Now, in any other situation where a group of people agrees to pool its money to buy something, this is a very easy question to answer. If you and three friends decide to go in on a large pizza, each of you will pay 1/4 of the cost. Assuming it is a typical pie, it will be cut into eight pieces and each of you will eat two. Thus, everyone has received an equal amount of the pizza and each has paid his fair share of the cost.

Of course, before anyone determines your fair share of the cost, you would be asked if you want pizza in the first place. In all such arrangements between human beings, other than government, you have a choice of whether you want to buy or not. Perhaps you’d like to eat something else. Perhaps you’re not hungry. You can always allow the other three to buy pizza and provide for your own meal yourself.

Not so with government. Not only can the other three take a vote and force you to buy part of this pizza, but they add insult to injury by proclaiming that their vote represented your consent to buy it. With this dubious consent in hand, they then decide what your fair share of the cost of the pizza will be, regardless of how the slices are distributed. If you have acquired too much wealth, even honestly, then you might find yourself paying for 3/4 of the pizza and only getting one slice in return. Once voluntary consent is eliminated and force is put in its place, it becomes difficult to use words like “fair” and “equitable” without committing grave offenses against the language.

Putting that aside for the moment, let’s assume that 315 million people have actually all agreed to constitute a government and pool their money to pay for its services. Before determining what anyone’s fair share of the cost would be, we first have to determine what services the government can offer. It would not make any sense for the government to offer services that only benefit one or two people, because all 315 million are paying. No, the only legitimate services that the government could offer would be those that contributed to the “general welfare.”

This widely abused term is not anywhere near as mysterious as it is made out to be. Promoting the general welfare is offering only those services that benefit every member of society equally. For example, if the government devotes resources to a military establishment to protect the nation’s borders, it is promoting the general welfare. Regardless of how effective the service might be, every member of society within the borders is benefitting equally from it. From the Wall Street financier to the general contractor to the grocery clerk to the homeless man, all are receiving equal protection from foreign invaders. Thus, a defensive military establishment is a service that promotes the general welfare and therefore could be offered fairly under such an arrangement.

Similarly, a system of law enforcement and courts would also promote the general welfare. If the person or property of one member of society were invaded by another, then employees of this agency would investigate the incident, determine if a tort or crime had been committed, and make a determination on what penalty or restitution should be paid by the defendant. This, too, would benefit all members of the society equally. Whether you were a Wall Street financier whose partner had embezzled millions or a taxi driver whose modest home had been burglarized, you are equally protected by laws against theft.

Notice also that the cost of providing these services is the same for each member of society. Obviously, it costs no more for an army to defend the financier from an invading army than it does to defend the taxi driver. The army defends against the invader for all within the borders at one cost. Similarly, it costs no more to provide a police officer, a judge, a jury, etc. for the financier than it does for the taxi driver. The only exception is defense attorney, which is provided for a defendant who cannot afford one, but this is a minute percentage of the entire cost.

In short, any defense of life, liberty, and property, whether from foreign invasion or aggression by another member of society, is a service that benefits the general welfare. It benefits all members of society equally and costs relatively the same to provide to all members of society.

Let us now consider some services that the government offers that do not promote the general welfare. Healthcare is obviously one. First, all members of society do not benefit equally when the govenrment provides healthcare. For example, Medicare only benefits people over 65 yeras of age and disabled people under 65. Not only does the program not benefit all members of society equally, but it actually does not benefit those paying for it at all, while those receiving the benefits (those over 65 and the disabled) do not pay at all. Recall the pizza example. Imagine if you had to pay for a whole pizza that your three friends ate, and then had to pay additional monies to provide for your own meal. Medicare, Medicaid, or other government programs for specific groups are really no different.

In addition, government medical care can never cost the same to provide to all members of society, as security services do. Some people will be sicker than others, either through misfortune or their own lifestyle choices. Some will need surgeries or chemotherapy or other expensive care. Some will need relatively little care. It is not an exaggeration to say that there may be 315 million different costs to provide healthcare to 315 million different people.

Education is another service that does not promote the general welfare. When the govenrment provides education, it is of absolutely no benefit to anyone that is not in school or does not have children in school. Neither does it benefit parents who homeschool their children or enroll them in private schools or childless adults who all must pay for government education. Some of the people who benefit do pay part of the expense, but obviously this does not constitute “fairness.” It is no different than if four friends all paid for 1/4 of the pizza, but two of them ate it all. Certainly, the other two had no “fair share” for any of the pizza at all. As with healthcare, the cost of education is also going to be different for different people. An education in medicine has a different cost than an education in engineering or art.

In looking at the federal government’s budget, one can see that the overwhelming majority of the money spent is not spent for the general welfare. Almost all of it is collected from one group of people and spent for the benefit of others. The only services provided by the federal government that truly promote the general welfare are those that concern defense of the borders and defense of person and property related to interstate commerce. At the state level, only defense of person and property within the state promotes the general welfare. All other services represent a forced redistribution of wealth from one person or group to another. When anyone other than the government engages in a “forced redistribution of wealth,” we call it “armed robbery.”

It should also be noted that even the “Defense” portion of the federal budget largely does not promote the general welfare. Only that portion necessary to defend U.S. citizens from aggression by foreign nations does. Those expenditures related to defending people in other countries or which are unnecessary for security not only do not promote the general welfare, they do not benefit anyone within the United States at all - except for those military contractors and financiers that are fortunate enough to profit from these activities.

There is also frequent confusion about government services commonly referred to as “infrastructure.” It is argued by some that if the government builds a road that is accessible to everyone, it promotes the general welfare. However, this argument does not hold up to scrutiny. If federal money is used to build a light rail system in Florida, it is going to benefit people who live or travel frequently in Florida much more than people who do not. Certainly, a citizen in California or Montana is unlikely to ever even see that railroad, much less benefit from it equally. Who would not agree that his fair share of this railroad is zero?

Even at the local level, a road or a bridge does not benefit every member of society equally. The local businessman whose products are more cheaply transported is going to benefit far more than the occasional traveler that might use the road for convenience. Yet, when the government builds the road, both are forced to pay equally. Furthermore, since the businessman is running heavier vehicles over the road with much greater frequency than the occasional traveler, it costs more in maintenance to provide this service to the businessman than to others. Obviously, the road or bridge does not promote the general welfare even at the local level.

So, what is your fair share in taxes? The answer is that you owe an equal share of those services provided by the government that promote the general welfare. Those services benefit you and everyone else equally. However, examination of any government budget, at the federal, state, or local level demonstrates that these services are now a tiny fraction of overall spending. A quick look at Florida’s budget summary reveals that about 8.7% of government spending promotes the general welfare. That $4.9 million in expense should be born by every citizen of Florida equally. The other $51.4 million does not promote the general welfare and should not be provided by the government at all.

An examination of the federal government’s budget for 2012 yields similar results. Once you subtract services that do no promote the general welfare, like education, healthcare, social security, and that part of the defense budget that is devoted to purposes other than protecting U.S. citizens from foreign aggression, you are left with a tiny fraction of overall spending.

For services that promote the general welfare, there is a finite cost. It does not vary depending upon how productive you are, so your fair share of that cost certainly can’t be a percentage of your income. Logically, the way to determine your fair share is to divide the total cost of services that promote the general welfare by the total population. If you have no dependents, then the quotient is your fair share. If you have dependents, then you simply multiply that quotient by the sum of your dependents and you. When you do the math, you’ll find that your fair share in taxes is a very small amount. As Thomas Paine pointed out, it is that tiny portion of your property necessary “to furnish means for the protection of the rest.” It would be easily paid by even a person of modest income. It would not require an income tax, as history before 1913 demonstrates.

For those services that the government provides to other people, your fair share is zero. However, the government routinely forces some people to pay more than their fair share and allows others to pay nothing at all. It generally collects the most in taxes from people who receive the least in benefits, which is the predictable result of offering services that do not promote the general welfare. Now, President Obama wants some people to pay even more. He and the Congress have the power, but that does not make it right. And please, President Obama, don’t insult our intelligence by calling it “fair.”

Tom Mullen is the author of A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.

>Make Obama Watch Ghostbusters

>It should be abundantly clear by now that the indisputable facts of economics and history are not sufficient to prevent our government from embarking on another expensive, disastrous program. While the debate on government destruction of the health care industry continues in the senate, President Obama prepares to make a trip to Copenhagen. There, he and other elite “experts” will cook up a new assault on private enterprise in general – under the tired pretense of “saving the environment.” Since intellectual, scholarly attempts to convince our rulers of the error of their ways have failed, I humbly suggest a simpler solution: make President Obama and the U.S. Senate watch the 80’s classic, Ghostbusters. Everything they need to know about government’s role in the environment is there. It is also presented simply enough that even a career politician can understand it.

The Ghostbusters story begins with three university professors who decide to try their hand in the commercial sector. They start a going concern with their own money to investigate paranormal activity. They face hard times early on, spending “the last of the petty cash” on Chinese food. They have a dearth of customers and face the fate of the majority of new businesses in their first year: bankruptcy. There is no suggestion that the government will bail them out. The market has seemingly determined that there was not sufficient need for their services and they will have to figure out some other product to offer to their fellow human beings in order to make a living.

However, at that moment, a disturbance occurs in a local hotel and their first paying customer places an order. The Ghostbusters successfully capture the offending spirit and collect their fee. The incident results in some publicity for the young firm and business booms. Soon, the Ghostbusters are running their own commercials and have more business than they can handle. They bring on a fourth Ghostbuster to keep up with the demand.

So far, the story has been a happy one for all parties concerned. The Ghostbusters have achieved success and have become enriched. Why? They have earned their money by making New York City safer (more “ghost-free”) and have created jobs in the process. Most importantly, all of this has occurred through private, voluntary exchange. The Ghostbusters’ customers pay their fees happily because the Ghostbusters offer them a service that they deem worthy of the price.

However, a story without a major conflict is no story at all. Ghostbusters is a superior story in that it correctly recognizes the source of all human conflict: government. Instead of the rather mundane epilogue that the story would have had at this point, where competing firms enter the ghostbusting market, prices fall, and soon all of society can afford to have a paranormal housecleaning, government instead rears its ugly head. A representative of the EPA knocks on the Ghostbusters’ door. What happens next couldn’t be more analogous to the real world.

The EPA agent Walter Peck is played to perfection by vastly underrated William Atherton. What is abundantly clear from his limited time onscreen is that, as a low-level federal agent, his primary motivation is not protecting the environment but rather lording it over any individual or business that fails to immediately submit to his absolute authority within his petty fiefdom. Under the pretense of protecting the environment, he attacks a private enterprise that has harmed no one, has helped the community, and has created jobs.

Having obtained legal authority to invade the Ghostbusters’ facility, despite the lack of evidence of any crime, Peck discovers what he deems to be a threat to the environment in the Ghostbusters’ ghost storage equipment. Of course, sophisticated equipment that could pose a threat to the environment is ubiquitous in a developed, industrial nation. However, thus far in the story, the Ghostbusters have managed their equipment safely and responsibly. They have done so both out of respect for their own safety and the safety of others and because their livelihood would be jeopardized if the ghosts they had captured were to escape and return to re-haunt the premises of their customers.

Despite pleas from the Ghostbusters, the EPA agent shuts off their ghost storage machine and chaos ensues. Remember that up until this point in the story, no environmental disaster has occurred related to the Ghostbusters’ supposedly dangerous equipment. However, by violating the liberty and property rights of the Ghostbusters under the pretense of a false threat to the environment, the government has created a real environmental disaster that now threatens everyone’s lives. In fact, the entire world is now actually threatened because of this one government intervention.

Consider how closely this story recreates the real world, ghosts and goblins notwithstanding. The government’s record on protecting the environment has followed this pattern without exception since the moment that activists got the idea that government force could save the world. Among the sparkling achievements of government environmentalism has been the banning of DDT, a safe and effective insecticide that was vilified and ultimately banned because of its supposed threat to the environment. Subsequently, farmers were forced to employ less effective insecticides that really do harm the environment, while a later study showed that DDT could actually be eaten by humans over an extended period of time with no adverse health effects.

In another historic blunder, the government decided to employ its ability to override private decisions via the threat of violence in order to encourage the production and distribution of ethanol, the fuel additive made from corn. This had the unintended consequence of causing food shortages and skyrocketing prices while failing to significantly affect America’s dependence on fossil fuels. The crowning achievement of this boondoggle was the revelation that the production of ethanol actually consumes more fossil fuel than it produces and is a net positive in carbon emissions. Had property rights been protected instead of destroyed by the government, none of this would have happened.

Most recently, the government decided that it would address two problems at once by “stimulating the economy” with its Cash for Clunkers program. Not only would this supposedly help the economy, but because those trading in their clunkers would have to buy “greener” cars (with other people’s money), it would also help the environment. Of course, the result was that perfectly good used cars were destroyed while their owners took out loans for new ones, resulting in a decrease in wealth and an increase in debt for society as whole. In addition, it turned out that the owners of the clunkers had previously been limiting their driving due to either concerns about breakdowns or the general lack of pleasure inherent in driving their clunkers. Once provided with new cars by the government, they began driving far more than they previously had, producing more exhaust and consuming more fossil fuels. Another government disaster funded by legal plunder.

As in the movie, every attempt by government to use its coercive power to protect the environment not only fails, but actually creates the very problems it purports to try to solve. In most cases, the problem does not even exist until the government undertakes to solve it. What is government’s solution? Always it is to attack private property and free enterprise.

It never ceases to amaze me that the American public at large exhibits absolutely no skepticism towards the politically-connected segment of the environmental movement. For 100 years, members of a certain political movement claimed that private property and free enterprise would destroy society. The 20th century proved them absolutely wrong. Those societies that did away with private property and free enterprise were destroyed themselves, while those that (for the most part) retained property rights flourished. Subsequently, the members of this same political movement suddenly became activists for the environment, studied the problem, and concluded that there was only one way to save the earth from environmental disaster: by abolishing private property and free enterprise. Does no one find this conclusion – by these people – an odd coincidence? Does no one even suspect their motives? Are we a nation of fools?

President Obama, please watch the movie. Appoint a “Ghostbusters Czar” to ensure that every legislator in the federal government watches it as well. When you have had time to reflect upon its profound message, please declare the environmental war on private property over. If you are looking for wise stewards of the land, you will not find them within the ten square miles you presently inhabit. However, there are some 300 million people that can do a better job just outside of town.

Check out Tom Mullen’s new book, A Return to Common Sense: Reawakening Liberty in the Inhabitants of America right here!

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© Thomas Mullen 2009

>The Crusade Against Greed: Government’s Scapegoat

>Despite the fact that this economic crisis is unfolding exactly the way that the Austrian economists predicted it would, along with the impending police state that Hayek predicted over 60 years ago, the American people show absolutely no sign of figuring out the CAUSE of this crisis. The most discouraging aspect of the whole debacle is the propensity of the American people to take the government bait by blaming this financial and economic collapse on “greed.” This plays right into the government’s hands.

As platitudes go, those warning against greed are the ones that people should be most suspicious of. Anyone that seems overly interested in making you feel guilty about accumulating too much property probably has an interest in acquiring what you leave behind. If nothing else, the fact that both Republicans and Democrats are vilifying greed should make people think twice about whether they may be burning the wrong witch when they seek to blame greed for our present troubles.

Webster’s defines greed as “a selfish and excessive desire for more of something (as money) than is needed.”[1] Any student of economics should be suspicious of this vice. While “selfish and excessive” certainly conjures up distasteful emotions, those are little more than prejudicial adjectives accompanying the real substance of the definition: desire for more of something than is needed. Does this mean that anyone with a savings account is greedy?

While one could counter that some savings are actually “needed,” a moment’s reflection should have one questioning what the real motivation for vilifying greed might be. Who do we find denouncing greed the most vehemently? The rich and powerful. Does this bother anyone besides me?

Let me be clear. Greed had nothing to do with causing this financial crisis, no matter how many times you are told that it did by the media and politicians looking for votes. In economics, the goal of every market participant is to acquire “more than is needed.” If the truth be told, acquiring more than is needed is what Jefferson really meant when he talked about the “Pursuit of Happiness.” Property – the fruits of your labor – is the means by which you sustain your existence and provide opportunity for intellectual and spiritual enrichment. Those who must work every waking hour just to provide the basic necessities of life have time for neither quiet meditation nor for reading Dostoevsky. By acquiring more than you need, you create leisure time to pursue your other interests and enable yourself to provide for your children or to give to charity. In this life on earth, acquiring more than you need is the means to happiness and security for yourself and those that you love. It is also your unalienable right, as our founders repeatedly told us.

The whole point of participating in a free market is to acquire as much property as you possibly can. Not only is there nothing wrong with this, it is actually vital to the health of the market. With every participant acting in their rational self interest to maximize their wealth, the minds of all participants are leveraged and society as a whole reaps enormous benefits.

One of the key mistakes that critics of free market capitalism make is failing to understand that there is only one way to acquire great value in that system: to offer great value in return. Listening to the proponents of socialism, one might be led to believe that one can only gain at another’s expense. This is not true. In a laissez faire capitalist system, economic agents trade to their mutual benefit. Every exchange is perceived by both parties to be an EQUAL exchange, or it does not occur. That is the nature of VOLUNTARY exchange. No one deliberately causes themselves harm. While they may not always trade wisely, more often than not they do, and in every case they make an exchange that they believe is in their best interests. One can only consume great wealth by producing great wealth.[2]

Thus, it should be clear that there is no such thing as acquiring “too much” in a free market. Only by supplying enormous value can any economic agent acquire enormous value. Acquiring property in a voluntary trade by offering equal value in return is the essence of “earning.” In a free market, all transactions are voluntary. Therefore, all wealth must be earned.

A second reason for wrongly perceiving a threat from greed in a free market is the failure to acknowledge the role played by risk. There is always some amount of wealth that can be acquired with very little risk. However, in order to achieve greater amounts of wealth, economic agents must accept greater amounts of risk. Risk acts as a counterbalance to what is commonly referred to as greed. If an economic agent seeks to acquire value far beyond the value he is offering in return, he can only do so by taking inordinate risk, and will virtually always fail. While the attempt to acquire value with this type of speculation might not be admirable, others certainly have no right to forcefully stop him from doing so. The risk is his, as are the gains or losses he realizes as a result. In a free market, there is no moral or economic justification for attacking “the speculator.”

That brings us to our present crisis and its real cause. It was not greed – the desire to accumulate more than one needs – that caused the crisis. What caused the crisis was government removing the risk of lending to sub-prime borrowers by guaranteeing mortgages through Fannie Mae and Freddie Mac. With no fear of losing their investment, lenders had no reason not to take inordinate risk in lending to sub-prime borrowers. In fact, Fannie Mae CEO Daniel Mudd told the New York Times that he was actually pressured by the government to continue increasing the risk that Fannie was exposed to. According to Times reporter Charles Duhigg,

“Capitol Hill bore down on Mr. Mudd as well. The same year he took the top position, regulators sharply increased Fannie’s affordable-housing goals. Democratic lawmakers demanded that the company buy more loans that had been made to low-income and minority homebuyers.”[3]

Whatever the true intentions behind creating these government-sponsored enterprises (GSE’s), they violated moral and economic law with predictable – and predicted – results. This intervention into the market and suspension of market forces was the direct cause of the sub-prime crisis, not greed.

This was more than just a bone-headed mistake by government. It was a crime. Governments are instituted to secure individual rights, including property rights. Instead of protecting the property of its citizens, government stole it to guaranty sub-prime loans. Now that its ill-advised program has failed, government is looking for a scapegoat. Enter “the greedy financier,” and the real culprit walks.

None of this is meant to absolve the lenders, who knowingly made loans to people who could not pay them back. However, the guilt should be shared equally between the lenders, the borrowers, and the government. It was not greed that they were guilty of, it was stealing. They stole money from the taxpayers to make the loans possible. All three parties benefitted by passing risk onto taxpayers without their consent. The problem was not the desire for too much wealth. It was the desire for wealth that they did not earn.

This is an important distinction, because we will soon be subject to a government “solution” to this supposed problem of excessive greed. Blaming greed for the crisis plays right into the government’s hands, as it allows government to respond with measures that will limit the amount of money that can be earned, even legitimately. Already we are hearing calls for more regulation. This amounts to a further violation of our rights and will continue the destruction of our markets. On the other hand, if we recognize the true cause of the crisis, we can demand less regulation and an end to government intervention into the marketplace, which is what our markets actually need. One cannot prescribe the medicine until one has accurately diagnosed the disease. Don’t let the government off the hook by buying into their crusade against greed. Instead of free markets, let’s punish the truly guilty for once.

[1] http://www.merriam-webster.com/dictionary/greed
[2] It should be noted that this applies to truly free markets. In the U.S. mixed economy, government privilege allows some to accumulate great wealth because of that privilege, rather than any great value they offer the marketplace in return. Of course, the solution to this is to eliminate government privilege, not restrict the market further.
[3] Duhigg, Charles “The Reckoning: Pressured to Take More Risk, Fannie Reached Tipping Point” The New York Times Oct. 4, 2008 http://www.nytimes.com/2008/10/05/business/05fannie.html?pagewanted=1&sq=mudd&st=cse&scp=1

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>The Bursting of the Socialism Bubble

>In the midst of what “debate” there has been about the eventual bailout of the financial sector, it is clear that even most of those opposed to the bailout do not understand what is happening. The unfortunate aspect of some of the commentary is that there is a faction arguing that without the bailout, the stock market will not crash. Thus, the debate is shifted to “which course of action can best protect stock market values?” They cannot be protected. The government argues that the credit squeeze could result in unemployment, while the other side argues that unemployment will not necessarily result if the bailout is not passed. Another position blames the crisis on too little regulation. All of these positions are wrong. There will be a painful adjustment in the stock market and massive unemployment, whether the government bails out the financials or not. The only question is how long it will last. That is reality when any bubble deflates.

The most unfortunate result of all of this misunderstanding would be for the American people to reverse their position and support the bailout just because there are severe market losses if it does not pass. Their initial instinct was correct, whether for the right reasons or not. The losses that these companies suffered due to massive malinvestment are real, and that must eventually be reflected in the value of their stocks.

Similarly, it will be unfortunate if the American people are convinced that more regulation is needed to prevent this from happening again. More regulation will not prevent a problem that was in part caused by too much regulation.

We have heard about the “tech bubble,” the “housing bubble,” and even the “dollar bubble.” All of these are real. The dollar bubble is about to burst, with global catastrophic consequences, but even that is not the biggest bubble that is out there. The biggest bubble, which has been building literally for the past century, is what I will call “the socialism bubble.”

What is the socialism bubble? Let’s define “bubble” first. The term “bubble” is used in economics to describe a large misallocation of resources (malinvestment). Anyone with even a passing familiarity with economics knows the basics: the central bank artificially infuses money and credit into the economy, that money flows toward projects that appear to be profitable under the artificially created conditions, but aren’t, and those projects ultimately fail, causing the bursting of the bubble. The worst part of the bursting of a bubble is that the greatest misallocation of resources has been human resources, and those people now have to find new jobs. They have to be reemployed elsewhere, in more profitable ventures, just like the capital goods that were misallocated to the projects. That is why unemployment accompanies recessions.

Like any other bubble, the socialism bubble is also a misallocation of resources. It has just taken longer to form and is much huger in scope. The principles behind it are the same, however. It represents government intervening into the economy to create artificial conditions that misallocate resources. Under these artificial conditions, the entire economy appears to be profitable, but isn’t. When the inevitable bubble bursts, all of the resources, including human resources, that were misallocated, become unemployed. We are about to experience the massive correction following this socialism bubble.

How did it happen? One must look back to before it started to understand it completely. It started at the turn of the last century. The United States of the 19th century had the closest thing to laissez faire capitalism ever achieved in history, arguably followed next by Great Britain. The defining principle of laissez faire capitalism is VOLUNTARY EXCHANGE. With everyone acting in their rational self interest, the minds of all participants were leveraged by the system to consistently produce optimal results.

In the laissez faire marketplace of the 19th century, wages generally declined over time. A pitiable lack of understanding of economics caused social reformers to condemn the free market for this.[1] They ignored the fact that the general price level fell faster than wages, making workers richer in real terms. They attempted to improve on the results that laissez faire capitalism had produced with government policy.

However, there is only one alternative to voluntary exchange: INVOLUNTARY EXCHANGE. Government economic policies FORCE economic agents to make choices that they otherwise would not make. No matter how one tries to euphemize socialism, that is what it is. By attacking voluntary exchange, socialism attacks the mechanism that creates wealth. That is the true root of the problem.

One way in which this manifests itself is in the cost of production. Government cannot come to a company that makes automobiles and force them to pay their employees more, provide them healthcare or pensions, pile one regulation on top of the next in terms of how the company operates its business, and then expect the company’s cost of making that automobile not to rise. As the cost of production rises, the company must find a way to keep the cost of producing their product below the market retail price. They might decide to manufacture SUV’s, which have larger margins, even though a spike in gasoline prices could put them out of business. See General Motors. The truth is that none of the American auto manufacturers are able to produce an automobile that is competitive in the market. Government will come up with a host of villains to blame for this, but look at the balance sheets of the Big Three and you will see why they are not viable. Concessions to labor unions (mandated by government) have made it too expensive for them to operate.

Similar government intervention is behind virtually all of America’s loss of manufacturing infrastructure. It is simply not economically viable to manufacture anything in the United States anymore. This is not a natural result of free markets. As previously noted, wages and other costs of production fell under the laissez faire system. Falling prices are a natural result of economic growth and innovation. Only the artificial conditions created by government intervention – the use of force to coerce economic agents – have made it more expensive to make things in America.

The cost of production is not the only pressure that socialism has put on the American economy. The welfare programs currently consume 11% of GDP. Keynesians would say that this is ok, because the recipients spend that money and increase demand. Hopefully, the coming calamity will discredit this economic school of charlatans once and for all. Wealth is created by production, not consumption. This redistribution destroys voluntary savings and ultimately capital. It also eliminates the other conditions that accompany a period of voluntary savings that facilitate natural expansion of the productive structure.

In any case, increasing socialism has put artificial pressures on the American economy for almost a century, and those pressures have accumulated to make America profoundly less productive. Like the communist countries, we have lived in a dream world in which government could use coercion to change economic reality. We have pretended that a business venture can spend more than it takes in and continue to survive. For a time, the free market aspects of America’s “mixed economy” allowed her to overcome these negative pressures, but that time has passed. Economic reality is about to assert itself in devastating fashion.

For at least two decades now, America has been producing far less than she consumes. All things being equal, this would not have gone on for long. However, all things have not been equal. The United States has a central bank, and the privilege of printing the world’s reserve currency. This is why the socialism bubble has been become so enormous.

Instead of a drop in consumption and a rise in unemployment[2] as its manufacturing sector migrated overseas, America went right on consuming, and those employees found new jobs in the “service economy.” With the Federal Reserve providing an unlimited supply of fiat currency, and with the ability to ultimately export that inflation overseas by importing foreign goods in exchange for U.S. dollars, America has been able to maintain the same standard of living as it enjoyed in its productive days. As long as foreigners accepted U.S. dollars, the dream world could persist. The bubble continued to inflate.

The ominous part of this is that today a large percentage of the American labor force is now misallocated by this bubble. There are tens of millions of American workers that are employed in ventures that will cease to exist once the socialism bubble bursts. We have seen the beginning of this with the failures of large retailers and restaurant chains, but that is only the tip of the iceberg. Worse yet, unlike previous recessions, there are no manufacturing jobs for these displaced workers to redeploy to. The productive structure must be rebuilt, and that doesn’t happen overnight.

Therefore, Americans must realize that a stock market crash[3] and mass unemployment are inevitable, whether government intervenes or not. The only question now is how long those undesirable conditions will last. There is no “solution,” government or otherwise, that will allow us to avoid this correction. If the government does not intervene, the stock markets will crash faster and the layoffs will begin sooner, but the total period of adjustment will be far shorter. If the government intervenes, no matter how they do it (including by allowing the Federal Reserve to massively inflate the currency), the adjustment period will be stretched out, with continued new malinvestment even as liquidation of current malinvestment occurs. That was the story of the Great Depression.

The only course of action that can speed up the recovery is a return to the laissez faire capitalism that made America great in the first place. This would include eliminating unnecessary regulation, abolishing the central bank and restoring sound money, eliminating minimum wages and other artificial price controls, capping and eventually phasing out the entitlement programs, eliminating other massive government spending like military welfare for other countries and unnecessary war, and restoring protections of property rights. In other words, Freedom. Don’t you think it’s time we tried it again?

[1] The lack of understanding of “real wages” was certainly not the only misconception of the social reformers, but it was a major misconception and representative of others.
[2] The European mixed economies have already experienced this adjustment, debased their currencies, regrouped under the European Union and an new currency, and are presently pursuing the same failed ideology to destroy this new economy as well.
[3] It is conceivable that the Federal Reserve could inflate the currency so much that the stock market remains at $11,000. However, if $11,000 only buys 10 loaves of bread at that point, it would still represent the same devaluation as a crash.

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>The Future of a Destructive Species

>Nature is often characterized as a delicate balance of plant and animal, predator and prey, land and waterway, forest and plain. While our world is probably more accurately viewed as an evolving environment, marked by constant change rather than balance, and certainly has periods of violent disruption (ice ages, etc.), for the most part, there are many long millennia between these disruptions during which Nature provides an environment of plenty for her creatures. The lion hunts the antelope, catching the slowest and weakest, and therefore culling the herd to make it stronger. The deer take what they need from the forest, leaving the forest intact to house the millions of other species which depend on its shelter. Even the lowly worm plays a part, consuming the very earth itself, and leaving behind nutrients that replenish the soil and make possible new life.

Of all of the species that have evolved on this planet, the mammals are among the most intelligent and most resourceful. While they enjoy many advantages over other species, they also have found their place in the great scheme of things, neither multiplying beyond the number their environment can support nor harming that environment in living out their lives and raising their families.

However, there is one mammal for whom this is not true. This species has developed an industriousness far beyond that of the others. Since its earliest history, this species of mammal has disrupted its environment and displaced other species, often wiping them out completely wherever it has made its home. It has destroyed forests both for the timber to build its homes and as collateral damage resulting from the expanse of its communities. It has destroyed the nesting habitats of countless endangered species of birds, interrupted the course of deer runs vital to the health of the herd, displaced fox, wolf, and squirrel, and destroyed countless ecosystems without hesitation, merely to expand its never-ending quest to subdue Nature herself in its own selfish interests.

It is long past the time to try to bring this species under some control before it succeeds in disrupting the environment any further. Its relentless need to widen its own habitat at the expense of every other species it shares a given locale with must be curbed before the earth as we know it becomes barren forever.

While some would argue that education or behavior modification could be successful in changing the habits of this ambitious species, the problem is now too urgent to wait several decades for such remedies to have an effect. A direct intervention is needed to prevent catastrophic consequences to the environment, including further deforestation, pollution of the water, and destruction of countless more ecosystems. Only the force of law can justly protect what we have left of the world we were born into.

Despite the urgent need of legislation and the immediate need to change the behavior of this species, it should be remembered that this species also has a right to exist, as long as it does not have any effect on its environment. Therefore, this new legislation must consist of just laws that will promote both the long-term sustainability of the environment and the long-term health of this species within it. Unlike so many failed efforts in the past, these laws should not amount to volumes of minute regulations that are difficult to enforce and impossible to fully understand. These new laws must represent a new way for this species to think about itself and its part in the world, and must be written so that obeying them is the only logical conclusion that a species not bent on suicide can come to. We must finally have laws written in words that this species can understand and accept.

We will need someone that can translate English into beaver.

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>I Want a New Name

>Call it a midlife crisis, but I can tolerate the label “conservative” no longer. Can there possibly be a name that makes a person sound more boring? Certainly this is the work of our adversaries, in an attempt to make our ideas sound old, outdated, and irrelevant. When I hear the word “conservative,” I think of an old guy in a smoking jacket, having a scotch at “the club.” Now, I have nothing against a good single malt, but as for the rest, well…

I’m not sure how this happened. How did the people that are in favor of maximum liberty become “conservative?” How did the people that are in favor of maximum government become “liberal?”

It wasn’t always this way. Most Americans in 2008 don’t remember this, but it was not that long ago that the term “liberal” meant exactly the opposite of what it does today. Locke, Rousseau, and Hume are all considered fathers of the modern “liberal tradition.” Their work directly inspired our founding fathers, who were liberals one and all. As late as the 1940’s, F.A. Hayek was still referring to the concepts of laissez faire capitalism and individual liberty as “liberal.” Even today, Merriam-Webster’s Dictionary defines liberalism as,

“b: a theory in economics emphasizing individual freedom from restraint and usually based on free competition, the self-regulating market, and the gold standard c: a political philosophy based on belief in progress, the essential goodness of the human race, and the autonomy of the individual and standing for the protection of political and civil liberties”[1]

If that is what liberalism is, one only need look at the campaign platforms of Barack Obama and Ron Paul to see that we have become terribly confused. Somehow, less freedom has become “liberal” and more freedom has become “conservative.” What kind of Orwellian doublespeak is this? What’s next, “War is Peace, Freedom is Slavery, and Ignorance is Strength?”[2]

Actually, over sixty years ago, Hayek warned us about the redefining of important words,

“The most effective way of making people accept the validity of the values they are to serve is to persuade them that they are really the same as those which they, or at least the best among them, have always held, but which were not properly understood or recognized before. The people are made to transfer their allegiance from the old gods to the new under the pretence that the new gods really are what their sound instinct had always told them but what before they had only dimly seen. And the most efficient technique to this end is to use the old words but change their meaning.”[3]

Wow. That explains why every time I hear people say the word “liberal” in relation to politics, I feel like Inigo Montoya from The Princess Bride. I want to say, “You keep on using that word – I do not think it means what you think it means.”

It’s time to start beating the pro-tyranny crowd at their own game. First, they changed the meaning of the word “liberal” to mean exactly the opposite of what it used to mean. The “classical liberals” became modern conservatives. If that weren’t bad enough, “conservative” has now been redefined as well. If you haven’t noticed, it doesn’t mean less government and more freedom anymore. We now have “neo-conservatives” that like big government just fine – complete with huge gains in entitlement spending, unnecessary warfare, corporate bailouts, and unmasked socialism. Neither “liberal” nor “conservative” have any liberty left in them. We need a new name.

I suggest that the freedom movement wage a little linguistic warfare itself. From now on, let us call ourselves “neo-liberals.” I know. Half of the people reading this just spit their cheerios all over their computer monitors. Lew Rockwell is organizing a posse. Even mild-mannered Ron Paul is warming up his left jab, unused along with his wrestling moves since 1952. I have to admit, the first time I said it, I had an attack of the heebie jeebies myself. However, it is not even a matter that “a rose by any other name would smell as sweet.”[4] It really is OUR name. It was simply stolen from us, like Charles Manson stole that song from the Beatles. Now, we’re stealing it back.

There is no reason why this couldn’t work. If we’ve learned anything, we’ve learned that if you say something over and over enough times, no matter how ridiculous it might be, you can get the majority of people to start believing it. This idea isn’t a bit ridiculous. We have to come to terms with the fact that, whatever we think conservatism means, the rest of America has moved on with the new “neo-conservative” definition. Conservative now means pre-emptive war, police-state security policies, record government spending, and corporate socialism. Liberal now means the politics of envy, higher taxes, record government spending, and democratic socialism. Liberty needs a new word, a word people under seventy can live with.

Neo-liberals. See? You’re getting used to it already.

Tom Mullen

[1] http://www.merriam-webster.com/dictionary/liberalism (the first definition is omitted as it appliesto the word as defined when used in a religious context).
[2] Orwell, George 1984 © 1990 Penguin Books
[3] Hayek, F.A. The Road to Serfdom Routledge Classics 270 Madison Ave. New York, NY 10016 Pg. 161
[4] Romeo and Juliet (II, ii, 1-2)

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>Can Individual Liberty Be Cool?

>While the big decisions about government and how our money is spent are made by the “over thirty crowd,” what is and is not cool belongs to the young. They are the ones that decide what clothes are cool, what music is cool, what movies are cool, and even what ideas are cool. Then they become adults, and before they know it, they have imperceptibly become uncool. Tragically, those who were coolest when they were young are the last to realize this when they are older.

What is cool is always what is new. Rock and roll was cool in the 1950’s, rock in the 1960’s, Disco in the 1970’s, new wave in the 1980’s, and grunge and rap in the 1990’s. What is old is never cool until it is so old that it has been forgotten. Then, it can become new all over again and have a new chance to be cool. Such is the fate of music, clothing, hairstyles, and ideas.

At no time in the past four decades has individual liberty been cool. During the 1960’s, the counterculture started a social revolution that still dominates American society. Some of it was good. The civil rights movement finally won equal rights for blacks and other minorities. Half the nation protested an immoral and terribly destructive war. Both of these movements had overwhelming support from the cool people – the young. The artist class of the time – the rock musicians and movie stars – united in support of these causes. College campuses protested. Anyone not for these programs was “not with it,” or what we would today call totally uncool.
However, the other far-reaching aspect of this revolution was its socialism. Certainly, socialism had been making inroads into American society since Woodrow Wilson, and had taken great strides under FDR. However, at the beginning of the 1960’s, America still held on to many of its values of individual liberty, free markets, self reliance, and property rights. That changed drastically with the advent of the Great Society, bringing in huge federal government spending programs like Medicare, Medicaid, the Department of Education, and various programs under “The War on Poverty.”

With the institution of these new social programs, which today combine with the New Deal programs to account for over half of all federal spending, the United States effectively shifted from a constitutional republic based upon individual liberty to a social democracy, devoted to economic equality. This shift was helped immensely by the fact that anyone who was remotely cool was behind it. Those same musicians and celebrities that correctly recognized the gross injustice of violating the civil liberties of blacks and other minorities somehow reconciled themselves with violating the most important civil rights of all – property rights. The same people that condemned the unjustified use of force against the Vietnamese had no problem initiating force against their fellow citizens to pay for the social programs. At least in popular culture, you had to be schizophrenic to be cool.

When I was a teenager in the early 1980’s, there was both a renewed interest in 60’s music and a new style of rock, called New Wave. Like any other teenager, my favorite bands were my heroes, and certainly the coolest people I knew about. While I rediscovered the Beatles, idolized John Lennon, and struggled to learn the guitar riff in “Shakin’ All Over,” I was electrified by the new sounds of R.E.M., U2, the Alarm, and The Housemartins. To the young and naïve, the haughty arrogance with which they contemptuously rebuffed the establishment and rebelled against authority was enough to create the illusion of intellectual superiority. Once someone is cool, you automatically think that they “get it.” Anyone that disagrees with them “doesn’t get it.” This is the message we get from our idols, and it is hard-coded into us by the time we’re old enough to drive. Such has been what is cool for several generations.

I consider myself lucky to have attended Canisius College in Buffalo, NY and had the professors I had in both economics and philosophy. Whatever the rest of the world was being taught then or is being taught today, my economics professors in 1984 were teaching me that Keynsian economics were on the way out, and that, among other things, monetary policy was an idea whose time had passed. At the same time, a philosophy teacher introduced me to John Locke’s Treatises on Civil Government. We spent weeks discussing those essays, dissecting them and discussing their importance to everything that our country was founded upon. I remember being completely enthralled with Locke, his ideas truly “making my heart beat faster.” I’m not sure if it was possible in 1690, but if it was, Locke was way cool.

It certainly didn’t sink in right away, but as I got out into the real world and got a little experience, I began to realize that there were some major problems with the philosophy that the cool people were promoting. Cool or not, their message seemed incompatible with the philosophy of liberty that I had come to believe in so deeply. It certainly came as quite a shock to me, when I finally LISTENED to the lyrics of John Lennon’s “Imagine,” that the song was actually a call for world communism. Although Michael Stipe has admitted that even HE didn’t know what he was saying on those early R.E.M. records, he is clear enough in his interviews about where he stands on politics. Similarly, “The World’s on Fire” is still one of my all-time favorite songs, but when I became aware of the Housemartins’ political beliefs, I realized that here again was the same socialist message.

Until Ron Paul’s presidential campaign, I had given up on individual liberty. Neither political party was championing it anymore – the Republicans said some nice things in 2000 and then increased entitlement spending more than any administration and Congress in 40 years. In addition, the Republicans had gradually become the pro-war party, contrary to their non-interventionalist stance throughout most of the 20th century. However, the lack of a choice in politics was not what made me abandon hope. It was the fact that for as long as I could remember, anyone that young people considered remotely cool were, for all practical purposes, socialists. With no political party taking a strong stance on individual liberty and the school system deteriorating so that no one seemed to be learning these principles, I had resigned myself that the individual liberty of Locke, the unalienable rights of Jefferson, and the self reliance of Emerson were now relegated to a dusty spot on my bookshelf. Freedom had been forgotten.

However, what was forgotten has become new again. I was quite surprised by the fact that so many college students were electrified by Ron Paul’s message. On no college campus that I can remember has the “cool crowd” ever rallied for individual liberty. Friends told me that Ron Paul’s anti-war message was what attracted young people, but that when they found out that his government was going to stop “giving them things,” that they would turn their backs in a second. I’m not so sure. Dr. Paul has said himself that he was surprised at how many young people focused upon his message about eliminating the Federal Reserve and the income tax, two of the “Ten Planks of the Communist Manifesto.”

As encouraging as that might be, individual liberty is never really going to catch on again until it finds a way to be cool – and let’s face it, all of the cool people are liberals. However, there is now a coalition forming between supporters of Ron Paul and disenfranchised Democrats to oppose civil liberties violations and wars of aggression. If together we can overcome these huge threats to our freedom, that alone will be a great victory. However, I wonder if we can agree that the social programs must go as well? While the wars are immoral and the police state is terrifying, it is the social programs that have destroyed the fabric of our productive society and eaten up all of our wealth. Will the same schizophrenia persist? Will we fight side by side to oppose the initiation of force abroad, but clash over ending it against our own citizens? Will we be united against violations of our rights by law enforcement, but divided when it comes to the most important right of all, the right to the fruits of our labor?

I have hope. Against a common enemy, former rivals often discover that the gulf between them is not that wide. Sometimes, they even find that they like each other. Libertarians agree with liberals on so many issues – war, tolerance, civil rights, free speech, freedom of the press. It is only property rights on which we differ. I humbly make one request of my new allies: consider the idea that voluntary exchange is a better way for us to deal with one another than coercion. I respect your passion to help those in need, but we cannot fund those efforts by force. If we can bridge this one gap, I believe we can form a coalition that will be unstoppable in restoring our republic to peace and freedom. By eliminating legal plunder, we can realize the dream of eliminating poverty and ignorance that seemed within reach a century ago. With the fruits of our labor restored to us, we can revive the private charities that once astonished de Tocqueville and inspired the world. Our nation can again be an engine of prosperity, not for the rich, but for all Americans, rich, poor, and middle class. If we can take this one leap of faith together and believe in freedom once again, there are no bounds to the heights we can reach.

Is that cool?

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